When it comes to fintech developments, bankers can be forgiven if they get a little tired of hearing of the latest “next big thing” that will render them obsolete. So it was something of a pleasant change when Lee Wetherington, Jack Henry & Associates’ resident strategy director and regular on the speaking circuit, told several hundred bankers of a tech-driven change that could be a big win for them.
Anyone who’s heard Wetherington speak knows that he could do well as a stand-up comedian, but he’s a serious student of new trends impacting banking. At the annual conventions (held jointly this year) of the Virginia and West Virginia Bankers Associations, he outlined several noteworthy developments.
Use the feedback loop
As the headline indicates, Wetherington sees a convergence of mobile shopping and mobile banking. He told the bankers that this is “an opportunity, the size of which you haven’t been presented with in 50 years.
The key element he said is the feedback loop. As described in a Wired magazine article, feedback loops provide people with information about their actions in real time, then give them a chance to change those actions. Those digital signs by the side of the road flashing “Your Speed” were an early use of this concept. [link http://www.wired.com/2011/06/ff_feedbackloop/ ]. Real-time feedback loops increasingly are incorporated in mobile phone apps, including personal financial management (PFM) apps.
Wetherington cited statistics in regard to mobile phone use that point to the potential for banks of feedback loops. First, he said, 80% of all online adults now own a smartphone, and smartphones have changed the way we shop. According to Federal Reserve statistics, “about half the smartphone owners have done comparison shopping in stores, so that’s about half of everybody. Seventy percent of those who have done that changed where they were going to purchase or what they were going to purchase as a result. That’s huge,” he said.
Why? Wetherington offered another Fed statistic: Sixty-three percent of mobile banking users check their account balance on their phones before making large purchases, and 53% of them who have done that decided not to purchase the item as a result.
This is context to the mobile shopping phenomenon that banks can provide, Wetherington told the bankers. None of the big e-commerce players would ever give a consumer reason not to buy, he said. “Google wouldn’t do that; Apple won’t do that; PayPal will not do that. You’re wearing the white hat; you can differentiate with this context.”
Turning impulse buying on its head
He pointed out that this is already happening. GoBank, the mobile banking product offered by GreenDot Bank, has a feature called “Fortune Teller” that, once you scan an item, gives you a red thumbs down if it is not a good time to purchase. Another example is Digit, an app that runs an algorithm looking at cash flow in your checking account every day. If it looks like you have $50 more than you need it whisks it to a savings account. “So confident are they in that algorithm that if they trigger an overdraft because of that transfer to the savings account they will pay for that overdraft,” said Wetherington. “What Digit doesn’t tell you,” he added, “is that they’re whisking that away to a savings account at another bank and they’re keeping the interest.”
But “the coolest thing I’ve seen in the last four months,” he said, is a new feature for Moven, the mobile PFM app that provides feedback on people’s spending and saving goals.
As Wetherington described it, “They are now looking at your cash flow moment to moment and whenever you’re kind of flush and in the green they will actually send you another ping and say ‘Hey, ‘you’re $200 bucks in the green right now compared to where you normally are in the month. Do you want put this away into savings?’
“Holy cow! They’re turning impulse purchase on its head to impulse savings.”
If the user taps and says, ‘Okay, I’ll just do $50,’ and locks that away into a savings account, said Wetherington, the app makes it very difficult to later tap that savings to spend on something. “You’ve got to virtually break it out of the phone to be able to spend it. Putting a little speed bump there. Neuroscience meets banking.”
Scan and loan
A related trend that banks should be part of, said Wetherington, is activity-based marketing, a term coined by analyst and author Ron Shevlin, now with Cornerstone Advisors. This is marketing within the context of an activity that’s already taken place.
“A customer is in a car lot and they scan the VIN number of the car they want, and, boom, you’re on that,” as Wetherington described it. Banks will check the VIN number for the car and come back with something like this: “We’re good so long as you pay this amount. Your monthly payment will probably be about this. Want to take that?”
State Farm Bank is putting all that together in an app right now, said Wetherington. It’s part of how the parent company is diversifying away from just relying on insurance, which they’re predicting will drop with the introduction of self-drive cars. “They want to begin financing your cars in proportion to the cars that they insure,” said Wetherington. “And they are going to do that with their app so that you can scan the VIN number at any dealership, anywhere in the United States and you can have two things immediately: How much they will finance for and the proof of the insurance on that car so you can drive it off the lot.”
It doesn’t end with cars, Wetherington added. It’s houses too. “Australia’s Commonwealth Bank, ” he said, “offers an app that looks at any piece of property in Australia and will tell you whether that piece of property is for sale, what the asking price is, and how much Commonwealth Bank is willing to finance and on what terms. In real time.” They’ve been doing this for six years, he added.
“Perpetual loan approval for anything, anytime as you are in the process of shopping for it.”